Ranbaxy-Zenotech lock horns over board directors

Ranbaxy Laboratories has objected to the appointment of two new directors to the board of Zenotech Laboratories, continuing a battle of attrition with the founder of the Hyderabad-based company. (Watch)

India���s largest drugmaker has told the Company Law Board that Dr Jayaram Chigurupati has no right to appoint the directors as the Zenotech founder attempted to take control of a company which is 47% owned by Ranbaxy.

Ranbaxy, which had acquired a majority stake in Zenotech a couple of years ago, says Chigurupati committed contempt because the Company Law Board (CLB) is seized of the matter and is considering naming three retired high court judges as independent directors. However, Chigurupati���s case is that he was the sole director on Zenotech���s board and had the authority to appoint new directors to transact routine business like approving accounts.

In its application, Ranbaxy wanted CLB to stay the appointment of the two new directors and to appoint three independent directors in their place. It wanted the board meeting last week, in which Chigurupati appointed the two directors, to be declared invalid.

Apart from Dr Chigurupati���s tiff with Ranbaxy over board composition, Zenotech���s minority shareholders are waging a separate battle with the company���s Japanese inheritor Daiichi Sankyo over the pricing of the open offer. Daiichi Sankyo got 47% of Zenotech after it bought 64% in Ranbaxy last year. Mr Chigurupati, who is the managing director of Zenotech, owns 26% in the company along with his family.

Under Sebi rules, if there is a change in promoter group of a listed firm, the acquirer has to make a compulsory open offer to acquire 20% from the company���s shareholders. While Zenotech���s minority shareholders want Rs 160 per share, the Japanese company is offering Rs 113.62 a share. Daiichi was forced to suspend the open offer after one of the shareholders got an injunction from the Madurai bench of the Madras High Court.

Earlier, CLB had also directed the Zenotech board to meet on August 19 to approve the company���s accounts after Dr Chigurupati���s counsel complained that the board had not been able to meet for over a year because the other two directors- Mr Bhutani and Mr Gill- would not attend any meeting.

The board meeting would have helped in getting a better reading of Zenotech���s financial health and could even determine the pricing of the open offer. But the August 19 meeting did not materialize because Bhutani and Gill resigned from the board on August 17 and August 25 respectively.

Finally, Dr Chigurupati decided to hold the contentious board meeting on October 1, where Zenotech���s board approved the resignations submitted by SM Bhutani and Sukhdev Singh Gill as directors of the company.

In their place, it has inducted MR Vikram as non-executive director and K Uma Devi as non-independent executive director with immediate effect. It was also decided the next board meeting will be held on October 9 to consider and approve financial results for the year ended 31 March 2009 and un-audited financial results for the quarter ended 30 June 2009.

But Ranbaxy wants the CLB to stay these appointments and restrain the current Zenotech board from holding any meeting. Dr Chigurupati���s counsel is expected to file the counter to this application soon.

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